Risk small investor & traders take

Risk small investor & traders take is always very high as they want higher returns in short period of time and normally they carry a feeling stocks below Rs.50 can multiple faster than stock above Rs.200 they look-out for stock with low price and never worry about fundamentals using this  tricky promoters have stock split to keep their prices low which many investor and traders fail to read.

Face Value-Face Value is important to know before buying a stock if you are attracted towards buying low price stock as buying Re.1 paid 20.Rupees stock and Rs.10 paid stock priced @ Rs,200 is same.
Investor also get attracted towards stock which has corrected more than 50% thinking it is value and they are getting the stock @ discount sale but they never discover the reason why the stock corrected so much and what are the changes which happened in the company for such price ersion.

It is not always small investors who get trapped even big investor, Mutual funds and Hedge funds get trapped in few great growth story which never see’s the light but stock market is the ability to take calculated risk so investor should check the track record of the company before investing.

Stephen Greenspan’s book, Annals of Gullibility: Why We Get Duped and How to Avoid It. Greenspan, a professor of psychology, explained why we allow other people to take advantage of us and discussed gullibility in fields including finance, academia, and the law. He ended the book with helpful advice on becoming less gullible. http://www.business-standard.com/india/news/when-intelligent-people-make-poor-decisions/382348/  When intelligent people make poor decisions

The irony is that Greenspan, who is bright and well regarded, lost 30 percent of his retirement savings in Madoff’s Ponzi scheme. The guy who wrote the book on gullibility got taken by one of the greatest scammers of all time. In fairness, Greenspan didn’t know Madoff. He invested in a fund that turned the money over to the scheme. And Greenspan has been gracious in sharing his story and explaining why he was drawn to investment returns that looked, in retrospect, too good to be true.

http://economictimes.indiatimes.com/quickiearticleshow/5488283.cms  Know the risks of investing in penny stocks

Investing in stocks is always fraught with risks. There is, however, no dearth of people around who not only invest in low-risk stocks but also in very high-risk stocks such as penny stocks, turnaround stocks and concept stocks because of the lure of high returns, and most of them often end up burning their fingers too.

It is not that investing is such stocks has never been rewarding. Sometimes people make good money by investing in high-risk stocks also. But such instances are very limited. It is better, therefore, to know the risks involved before putting your hard-earned money into high-risk stocks:

Penny Stocks: These are low-priced stocks, typically less than Rs.20 (although there is no set definition). Trading in these stocks happens mostly for speculative purpose. The price movement of these stocks is more driven by trading than by the stock’s fundamentals.

Turnaround stocks: Generally a company that survives bankruptcy is considered a turnaround stock. This definition also applies to turnaround in fortunes of fundamentally-strong companies after they have experienced some hard times. The bad phase can occur due to adverse market conditions, adverse policy and economic conditions or even poor management.

Concept Stocks: Unlike penny and turnaround stocks, concept stocks are those stocks which are likely to create significant value for investors in future and are from sunrise industries or are focusing on new innovative and unique industries, technologies or services.